42,200 PPI complaints 'rejected unfairly' by Clydesdale Bank

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Between May 2011 and July 2013 the bank chose to ignore documents that proved complainants were entitled to credit card, loan and mortgage PPI redress.

Problems could have been discovered much earlier but the Financial Ombudsman Service (FOS) were repeatedly misled about practices, including when a team of staff deleted and falsified information about the availability of documents.

The failings resulted in an estimated 42,200 complaints being unfairly rejected and a further 50,900 people may not have received enough reimbursement from upheld complaints.

Clydesdale Bank are reviewing all PPI complaints handled before August 2014 and have agreed to reimburse any customers who've missed out because of complaint handling failings.

Ignored documents

Two policies to save time and money meant less documents were reviewed when complaints about PPI sold with loans and credit cards were handled.

The changes made by the bank in May and July 2011 saw the bank outright reject or underpay redress for PPI complaints, despite having access to evidence proving more compensation was due.

While in many cases documents were available longer, those relating to loan and mortgage products repaid by customers more than seven years prior didn't technically have to be retained.

With some documents missing, they were finding it time consuming to piece together records and determine whether to uphold complaints, so in May 2011 they introduced a policy that complaint handlers no longer had to look for these documents.

There were similar gaps in customers' credit card statements for older accounts after a review in July 2011, the bank thought they might be overpaying customers when making best guesses about the level of compensation due.

So they then introduced a policy to ignore any credit card statements they'd stored prior to 2000 when calculating redress - saving them time and money.

Missed opportunities

PPI redress is an expensive problem for banks and pressure to keep up with the high volumes of PPI complaints was common at the time.

But the FCA have labelled the policies to ignore documents as "inappropriate" and point out Clydesdale Bank missed numerous opportunities to improve, leaving them with little excuse for getting it so wrong.

In fact the FOS first began to query the bank over their document searches back in August 2011; making frequent requests for proof the bank had carried them out correctly.

Alarm bells must have been ringing: in January 2012, still unaware of the bank's policies, the FOS outlined the exact steps that should be taken to figure out whether PPI was mis-sold to a customer.

Again they highlighted reasonable searches of systems - including archives - should be carried out when investigating complaints and all available information about the customer should be used.

But it wasn't until June 2013, after being found out by the FCA, that Clydesdale Bank finally changed their policies.

Misleading customers

The banks' complaint handling procedures weren't transparent to customers either and they were routinely misleading about the availability of documentation.

Georgina Philippou, acting director of enforcement and market oversight at the FCA says, "in ignoring documents it held which were relevant to its customers' complaints, Clydesdale failed to treat its customers fairly".

Rejected complaints were explained away with template letters claiming documentation didn't exist: "unfortunately we have been unable to trace any documentation to allow us to carry out an investigation...due to the length of time that has elapsed since the loan account was closed".

And the FCA highlighted a case where a complaint couldn't be upheld even after being referred on to the FOS; in reality the bank held records that would have proven otherwise.

The banks now very apologetic about their mistakes and began fixing their procedures once the issues were finally uncovered by the FCA.

But given their obviously misleading practices and the number of opportunities they had to fix their complaints handling policies before getting caught out, there'll be wide scepticism over how genuine that apology is.

The large penalty is a lesson to banks handling customer complaints, for example those mis-sold card protection redress, to get policies right first time round or face an even worse back log of work and greater expense.

Clydesdale Bank will now review all PPI complaints made prior to August 2014 and will be in touch with those affected.